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China may move towards an open-market economy
China's leaders are set to meet to consider major economic reforms, but just how groundbreaking will they be?

Jim Middleton speaks with Professor Zhang Yunling, Director of International Studies at the Chinese Academy of Social Sciences.
Transcript
JIM MIDDLETON: Zhang Yunling, welcome to the program.

PROF ZHANG YUNLING, INT'L STUDIES, CHINESE ACADEMY OF SOCIAL SCIENCES: Yes, my pleasure.

JIM MIDDLETON: Is this plenum as important for China's future prosperity as was the watershed plenum convened by Deng Xiaoping back in 1978?

PROF ZHANG YUNLING: I think China's economic development comes to a new stage. After more than 30 years high growth rates, now China, if it continues, they'd have to reform, to change, to a deepening liberalisation. And that is the current leaders that work, have to, you know, in the forthcoming few days, there will be an important meeting that decides the direction and contention of the reforms and new opening policy.

JIM MIDDLETON: Much has been made of the distorting and crippling effects of state-owned enterprises, that their dominant position actually holds back growth in China. Do you expect that this plenum will make moves to open them up to genuine competition, to allow private enterprise to compete with them on a more level playing field?

PROF ZHANG YUNLING: The problem is, you know, they've become too powerful, and in the key areas they have become do dominant. So now we realise this kind of domination and powerfulness of the state's giants will hurt the competition in domestic markets. They have to change. But this reform really is relating to the reform of Chinese banking system. Now it's dominated by state banks. But now open already allowed to non-state financial institutions to play their role, encourage that non-state investors to set up banks. So that can have competition and also have broad financial structure that would be very necessary to provide the loans and credit in the future for the small and medium non-state investors.

JIM MIDDLETON: To what extent is reform of the financial sector the key to all this? Are the distortions of the financial system created by the current state of the banking sector in need of overhaul to maximise the prospects for China's future prosperity?

PROF ZHANG YUNLING: Yes, I think that's, you know, exactly what the current debate in China is going on. And that is exactly the direction of the future reforms.

The key areas of the reform is to readjust the relations and roles of the government and the market, which the market will play the major role and the government back to what it should do better, that is, the social, you know, areas which are relating, for instance, just for income distribution, social security system, and so on.

JIM MIDDLETON: Talking about income distribution and a more difficult question, that is, land reform. How seriously is collective ownership of rural land holding back economic development in China? Will this be seriously addressed at the plenum and, if so, how?

PROF ZHANG YUNLING: It should be I think. We'll see. The major direction of this reform, that is how to make the farmers, the owners of the land benefit from this urbanisation of marketised land, the benefits. So in the past with the regulation, if the land is to be used and sold on the market, the farmers, who are the real owners of the land get very little.

JIM MIDDLETON: It's a very big agenda. There are high hopes in China for this plenum that it will lead to the reforms necessary for China's next stage of development. Are those high expectations going to be met or are people going to be dissatisfied with the results?

PROF ZHANG YUNLING: I think on the good side, that is, among the top decision makers there is a very strong consensus that China needs to have bold reform and deepening liberalisation. So there is no disputes, different views on this direction. So that makes the decision makers, the new leader groups easy to make decisions to go to the direction which China needs.

And also there's very strong support from the society because China from poor to welfare, people have the food to eat and to have at least the basic living places, security and income. But they require a higher quality of life.

The economy, I think the majority in China they think Chinese economic growth potential is still there, and in the next 10 years at least we can secure about 7 per cent growth rate. So it is lower than in previous stage, but still relatively higher growth rate which can support this kind of reform and also people's expectations.

So generally, I think I'm generally confident about this kind of realisation of China's dream that by 2020 China will overcome generally this middle income trap and tend to be overall a welfare society.

JIM MIDDLETON: Zhang Yunling, thank you very much indeed.

PROF ZHANG YUNLING: It's my pleasure. Thank you so much.
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